Answered: udget is usually thought of as a means…

udget is usually thought of as a means of planning for future financing needs. Why would a cash budget also be important for a firm that has excess cash on hand? Explai

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4QTD

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Concept explainers

Cash budget

A cash budget is an estimate of an organization's cash flow for the future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future. If cash receipts are insufficient to cover future expenses, an organization may plan to obtain funds from other sources. After estimating the sales, purchase, and capital expenditure budgets for the year, management develops a cash budget. These budgets are created to ensure that an organization's cash flow is managed. It is important to note that only cash transactions are recorded when actual cash enters and exits an organization.

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A cash budget is usually thought of as a means of planning for future financing needs. Why would a cash budget also be important for a firm that has excess cash on hand? Explain.

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If management is being evaluated on their ability to manage a budget, what can they do to decrease cash outflow?
Explain how both small and large organizations can benefit from budgeting.
Why might a rolling budget require more management participation than an annual budget?
The cash budget is part of which category of budgets? sales budget cash payments budget finance budget operating budget
Which budget is the starting point in preparing financial budgets? the budgeted income statement the budgeted balance sheet the capital expense budget the cash receipts budget
Explain the role of a sales forecast in budgeting. What is the difference between a sales forecast and a sales budget?
Which statement about the cash budget is correct? It is also called the statement of cash flows. It can show managers when the company will experience a net loss. It can indicate when sales are insufficient. It can show managers when additional financing will be necessary.
A very important role of the cash budget is to Determine how to finance dividend payments Plan for appropriate financing needs Determine the optimal source of financing for the organization’s operations Help identify credit customers who might not pay
A very important role of the cash budget is to a. Determine how to finance dividend payments b. Plan for appropriate financing needs c. Determine the optimal source of financing for the organization’s operations d. Help identify credit customers who might not pay
What is a cash budget, and how is this statementused by a business? How is the cash budget affected by the CCC? By credit policy?